Transcript Document
Technical Analysis -Advance Level
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Disclaimer
This presentation is being provided solely for informational purposes. Mercantile Exchange Nepal Limited does not warrant the accuracy or completeness of any information provided in this presentation and such information is provided without any correctness or condition of any kind. Neither Mercantile Exchange Nepal Limited nor any other person associated presentation or its with the contents creation shall be of liable this or responsible to any person for any harm, loss or damage that may arise in connection with the use of this presentation, including without limitation, any indirect, third party, or consequential damages.
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Flow of Presentation
• Technical Indicator • Japanese Candlesticks • Technical Indicators • Conclusion RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Technical Indicators
• A technical indicator is a series of data points that are derived by applying a formula to the price data of a security • Price data includes any combination of the open, high, low or close over a period of time RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Technical Indicators
• A technical indicator offers a different perspective from which to analyze the price action.
• Some, such as moving averages, are derived from simple formulas and the mechanics are relatively easy to understand • Others, such as Stochastics, have complex formulas and require more study to fully understand and appreciate • Technical indicators can provide unique perspective on the strength and direction of the underlying price action RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Technical Indicators
• Why Use Indicators?
An indicator can act as an alert to study price action a little more closely Indicators can be used to confirm other technical analysis tools Some investors and traders use indicators to predict the direction of future prices RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Technical Indicators
• Tips for Using Indicators Indicators indicate Signals should be taken in context with other technical analysis tools Learning how to read indicators is more of an art than a science Hundreds of indicators in use today Choose carefully and moderately RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Japanese Candlesticks
• Candlestick charting first appeared sometime after 1850 • Credit goes to legendary rice trader named Homma from the town of Sakata • Original ideas were modified and refined over many years of trading eventually resulting in the system of candlestick charting that we use today RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Japanese Candlesticks
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Candlesticks Pattern, WHY??
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Doji
• Bulls and Bears are at an equilibrium A state of indecision Always take notice RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Gravestone Doji
Open and the close occur at the low of the day Top of a up- trend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Dragonfly Doji
Open and the close occur at the top of the day Bottom of a down- trend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Bullish Engulfing Pattern
End of a downtrend Buying pressure Beginning of an up - trend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Bearish Engulfing Pattern
Opposite to the bullish pattern End of an up – trending market Selling pressure RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Dark Cloud Cover
Two – day bearish pattern End of an upturn Closes below the 50% level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Piercing Pattern
End of a declining market Price opens lower than the previous day Closes above the 50% level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Hammer
Long lower shadows and small real bodies Patter at the bottom of the down-trend is Hammer RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Hanging-man
Long lower shadows and small real bodies Pattern at the top of the up-trend is Hanging Man RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Morning Star
Bottom reversal signal Beginning of an up - trend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Evening Star
Opposite of the Morning Star Top reversal signal Beginning of a down - trend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Major Candlesticks Pattern
•
Shooting Star
Warning that the top is near Bottom of a trend is a bullish signal (inverted hammer) RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Moving Averages
• Simple Moving Averages • Exponential Moving Averages RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Moving Averages
Simple Moving Averages • Average Value of a commodity over a set period • Emphasizes the direction trend • Upward trend is when a shorter duration MA (for e.g., 15 days) crosses over the longer duration MA (for e.g., 50 days) • Downward trend is when a longer duration MA (for e.g., 50 days) crosses over the shorter duration MA (for e.g., 15 days) RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Moving Averages
Simple Moving Averages RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Moving Averages
Exponential Moving Averages • Similar to Simple Moving Averages • Except more weight is given to the latest data • 12- and 26-day EMA’s are the most popular • Example of EMA RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Moving Averages
Exponential Moving Averages RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Pivot Points
• Predictive indicator of Calculation used for Pivot market movement Points • Uses the previous time Resistance 3 = H + 2*(P-L) Resistance 2 = P + (Res1 frame prices to Sup1) calculate the next time Resistance 1= 2 * P - L frame’s pivot points Pivot Point = ( H + C + L ) / 3 Support 1 = 2 * P - H Support 2 = P - (Res1-Sup1) Support 3 = L - 2*(H-P) RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Example of Pivot Points
• Gold Prices on 31st March 2011 Open 1435.80
High 1445.05
Low 1427.80
Close 1431.39
R2 1452.13
R1 1440.97
Pivot 1434.77
S1 1424.54
S2 1417.10
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Example of Pivot Points
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Relative Strength Index
• Developed by J. Welles Wilder • Measures the magnitude of gains against the magnitude of losses over a period • • Range 0-100 • Formula=100-100/(1+RS) where, RS=Average Gain / Average Loss RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Relative Strength Index
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Relative Strength Index
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Bollinger Bands
• Created by John Bollinger in 1980s • Determines the overbought and oversold zones • Consists of three curves Upper Band-Middle Band+2 S.D. Middle Band-20 Days SMA Lower Band-Middle Band-2 S.D.
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Bollinger Bands
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci
• Discovered by Leonardo Pisano • Series numbers: 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on • Fibonacci Retracement Levels (Golden Mean) 0.236, 0.382, 0.500, 0.618, 0.764
• Fibonacci Extension Levels 0, 0.382, 0.618, 1.000, 1.382, 1.618
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci Retracement
• Works best when the market is trending • Used to determine support and resistance level • General consensus is the market always reverses from one of the support/resistance levels RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci Retracement
• Uptrend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci Retracement
• Uptrend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci Retracement
•
Downtrend
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci Retracement
•
Downtrend
RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci with Trend Lines
• Useful on trending market i.e. Uptrend or Downtrend • Example of silver • Want to take a long position but don’t know when • Draw the trend line from 24th August till 22nd October • Draw the Fibonacci levels taking a swing low price of USD 22.79(coinciding with one of the lowest trend levels of 22nd October) and swing high price of USD 29.34. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci with Trend Lines
• Silver Prices found support at 61.8 level i.e. USD 25.31 (coinciding with the trend line as well) on 16th November • Take a Long position at this level • Silver Prices broke the swing high level on 4th December RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci with Japanese Candlesticks • Tracking the development of exhaustive candlesticks • Indicates a continuation of a trend • Example of Gold • Draw the Fibonacci levels taking a swing low price of USD 1156 on 27th July and Swing high price of USD 1387.08 on 14th October RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
Fibonacci with Japanese Candlesticks • Gold prices found support at 23.6 Fib Level on 21st October • Formation of a Dragonfly Doji after a bearish candle the preceding day • Dragonfly Doji indicates the beginning of a bullish trend • Take a long position at this level • Gold Prices break the swing high level on 5th November RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED
MACD
• • • • Developed by Gerald Appel in late 1970s • Acronym for Moving Average Convergence Divergence • Identify a new trend • Calculation MACD: (12 Day EMA-26 Day EMA) Signal Line: 9 Day EMA MACD Histogram: MACD-Signal Line • • • Rules for Trading When MACD>Signal Line=Bullish Market When MACD RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED • Technical Indicators work in tandem with each other • Weigh the pros and cons of each indicator before reaping the results • The best strategy forward is using technical and fundamental factors simultaneously RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED For further updates, Like Us on Facebook! Link: https://www.facebook.com/mexhomeMACD
Conclusion